A systemic problem requires a systemic solution.
Black businesses, because of lack of access to capital, among other reasons, cannot grow and hire like their white peers. Yet if 15% of Black-owned businesses had employment parity, they would create 600,000 new jobs and add $55 billion to the US economy, according to a study from AEO.
In other words, not investing in Black businesses leaves money on the table.
My investment and advisory firm, CapEQ, has been working for two years to assemble a group of partners to solve this persistent problem in our society. Last week at the AEO 2020 Digital Conference we announced Path to 15|55, a collaborative initiative to reimagine how Black businesses are supported and understand the systemic barriers that hinder growth in every sector. Our partners include Surdna Foundation, the W.K. Kellogg Foundation, and the Brookings Institution.
If coronavirus illuminated the persistent inequities faced by Black communities, the civil unrest following the death of George Floyd forced everyone in this country to come to terms with what we were going to do about it. Ever since the shutdown of our economy, and especially since our collective reckoning on race was accelerated by the Black Lives Matter protests over the last few weeks, I’ve been talking to impact investors, foundations, and policy makers about we need to do to meet this historic moment. And I tell them the action we must take is clear: Support Black businesses.
Even before the pandemic, the barriers to success for Black communities and Black businesses have been too high for too long. Black-owned firms earn lower-levels of revenue than similar white firms and Black entrepreneurs are less likely to get loans than their white peers in the same industry. This persistent and systemic discrimination against Black business owners means Black-owned businesses have fewer employees and there are fewer Black entrepreneurs compared to other demographic groups.
The pandemic shuttered many Black businesses, and many may never re-open. A study from the National Bureau of Economic Research showed Black businesses were harmed the most in the shutdown—with over 40% of black businesses closing their doors from February to April. At least 90% of businesses owned by people of color have been or will likely be shut out of the Payroll Protection Program.
This issue is personal to me—I am a Black, female small business owner with a family who relies on me. I have been fortunate and successful, but I myself have struggled to get a loan and access the capital I need. I was almost shut out of accessing coronavirus relief funds because I did not have a formal relationship with a bank.
Path to 15|55
These inequities do not only hurt me and entrepreneurs like me, but they also cause us to miss out on a massive investment opportunity. So how do we harness this opportunity in this historic moment? The unlock that opportunity, Path to 15|55 is coalescing around three core areas to support Black Businesses:
- Growing existing business: Everyone loves start-ups, and they are an important part of our economy. But there are a lot of existing initiatives to help Black and other people of color start businesses. What we need is something to help them grow their businesses. Path to 15|55 will target existing businesses and position them to accelerate growth and hire additional employees.
- Investing in systems: Right now, more or less, Black businesses are on their own. There is not the same ecosystem for Black businesses as there are for white. With some notable exceptions, Chambers of Commerce in communities are typically white-led and focused on the needs of white entrepreneurs. We need to support organizations and networks that will invest in systems and networks focused on policy, advocacy, and removing barriers to capital for Black businesses.
- Revaluing community assets: Due to systemic inequities, Black businesses tend to be in low growth industries that have lower barriers to entry. Path to 15|55 will work to transform how business owners and investors view and value existing assets in the Black community to drive growth.
These goals are incredible, yet practical when you have the right resources, strategies, and people coming together. We know we will not be able to achieve them without an expansion of our partnerships and support. If you’re a government agency, non-profit, financial institution, or investor looking for real, approachable solutions to accelerate Black business growth, we invite you to join us on this path.
Please visit http://www.pathto1555.org and sign up to help us power this journey.
Tynesia Boyea-Robinson is president and CEO of CapEQ.